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International Journal of Management and Business Development

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A Contemporary Framework for Evaluating Fuel Subsidy Withdrawal Effects on SMEs: Financial Reporting, Bank Financing, and Operational Performance Dynamics

DOI https://doi.org/10.55640/ijmbd-v03i09-03
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Nguyen Minh Quang 1 , Tran Thi Lan Anh 1 ,
4 Department of Business Administration Ho Chi Minh Institute of Management Studies Ho Chi Minh City, Vietnam
4 Faculty of Entrepreneurship and Innovation Vietnam School of Business Development Hanoi, Vietnam

Abstract

The removal of fuel subsidies has emerged as a significant economic policy instrument in many developing economies, particularly in Nigeria, where subsidy reforms have generated substantial implications for businesses and households. Small and Medium Enterprises (SMEs), which constitute a critical segment of economic development, are particularly vulnerable to sudden increases in production and transportation costs resulting from fuel subsidy withdrawal. This study develops a contemporary framework for evaluating the effects of fuel subsidy removal on SMEs through three interconnected dimensions: financial reporting, bank financing, and operational performance. Drawing exclusively from existing literature, the study adopts a research-review approach to synthesize evidence regarding the economic consequences of subsidy reforms and their implications for enterprise sustainability. Findings indicate that fuel subsidy withdrawal significantly affects accounting records through increased operating expenses, constrains access to external financing due to elevated credit risks, and reduces operational efficiency through escalating production costs. The study further demonstrates that financial institutions reassess lending decisions under inflationary conditions, thereby influencing SME growth and survival. The paper contributes a conceptual framework that integrates accounting performance, credit accessibility, and operational outcomes into a unified analytical model for assessing policy impacts on SMEs. The findings offer valuable insights for policymakers, financial institutions, and business managers seeking to mitigate adverse effects associated with fuel subsidy reforms.

Keywords

Fuel Subsidy Removal, SMEs, Financial Reporting, Bank Financing

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